Tuesday, April 14, 2009

Conservative credibility on tax issues...not so much

See update at end of post (Wednesday a.m.)...

There's a report starting to get some attention this afternoon arising out of some comments Michael Ignatieff's made today during his swing through southern Ontario this week: "Tax hike likely unavoidable, Liberal leader says." Here's what Ignatieff is reported as saying, in this very brief report, in response to a questioner:
Ignatieff’s comments were in response to a question from Cambridge business leader John Bell, who wanted to known when the federal debt will be paid back.
“We will have to raise taxes,” but not at the expense of hurting the recovery from this recession. He added that “an honest politician” cannot exclude a tax hike as an option.
“I am not going to load a deficit onto your children or mine,” Ignatieff said.
To anyone contemplating how to grapple with the billions in debt we are facing as a result of Conservative overspending, unwise GST cutting and now this recession, it seems entirely reasonable that any and all remedies to deal with the problem will be on the table for thinking politicians who care to discuss issues honestly and rationally, including tax policy. We will need to get out of the Conservative deficit hole somehow.

Speaking of persons who care to discuss issues honestly and rationally, there was one in the news a few weeks ago:
Canada and the world are facing a long and deep recession that will fundamentally alter the nature of capitalism, former Bank of Canada governor David Dodge said in an exclusive interview a year after he left the bank.
That's a premise to keep in mind as economic and tax policies are discussed going forward. Automakers approaching bankruptcies, southern Ontario's manufacturing base being decimated, times have changed. Cookie cutter political slogans about taxing and spending seem oddly dated. More from Dodge:
As recovery takes hold, Ottawa could then raise taxes a bit – by, say, increasing the GST by a percentage point – to nurse the country's books back to health.

“A little bit of tax here and there would do it,” Mr. Dodge said.

He always opposed the federal government's move to cut the goods and services tax by two percentage points in the first place. The hole the tax cuts made in government revenue left Ottawa with a structural deficit at the end of the 2007-2008 fiscal year, he said – even though the Finance Department won't admit it.

So, raising the GST to make up for recessionary spending “is a very sensible way to do it.”

But the world will never go back to the way it was, according to Mr. Dodge.
Having pointed those remarks from Dodge out, it's not to say that Liberals will even be going there. It's simply a reminder that the economic ground has shifted and tax policy presumptions from Conservatives who have led us into great deficit all by their lonesomes prior to this recession have impaired credibility in comparison to voices like Dodge, voices who will likely multiply during future debates.

And recall this little revelation of late which also undermines Conservative credibility on tax issues:
Ian Brodie, Prime Minister Stephen Harper’s former chief of staff, delivered an astonishingly frank explanation today for why the Conservative government cut the Goods and Services Tax, and why he’s glad they did, even though just about every economist and tax expert said it was a terrible bit of public policy.

Despite economic evidence to the contrary, in my view the GST cut worked,” Brodie said in Montreal at the annual conference of the McGill Institute for the Study of Canada. “It worked in the sense that by the end of the ’05-’06 campaign, voters identified the Conservative party as the party of lower taxes. It worked in the sense that it helped us to win.

It’s not really surprising, of course, that campaign calculations lay behind the GST cuts, which have cost the federal government about $12 billion a year at the worst possible time. That’s been obvious all along.

What’s noteworthy is that Brodie, who is now a visiting fellow at the McGill institute, doesn’t shrink from publicly asserting that such a major public policy decision can still be deemed a success—even in the face of “evidence to the contrary”—if that move paid the desired political dividends. (emphasis added)
Canadians will be able to weigh for themselves the respective positions on tax policies, if they do become a feature of an upcoming election campaign. We have the Conservative party on the one hand who has been exposed by Harper's former chief of staff as implementing tax measures for political gain, despite economic advice to the contrary. Tax measures that have put us in a ditch. Then we will have other parties making their own proposals. It's respectfully submitted that tax issues then are not likely to be the fertile political ground that Conservatives think it will be going forward.

See also Far N Wide.

Update (8:22 p.m.): See Lib Arts & Minds; BCer as well.

Update (Wednesday a.m.): Ignatieff follow up:
Michael O'Shaughnessy, Mr. Ignatieff's press secretary, said later that the party has "no plan and no desire to raise taxes" in a recession.